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Answer: The clearinghouse will coordinate Johnson's settlement with any eligible settling shorts.
## Explanation In futures markets with physical delivery, the clearinghouse acts as the central counterparty and coordinates the settlement process between long and short positions. When a long position holder (like Jack Johnson) is due to receive physical delivery, the clearinghouse: - **Matches** the long position with eligible short positions that are due to make delivery - **Coordinates** the entire settlement process - **Ensures** the physical commodity is delivered according to contract specifications Option A is correct because the clearinghouse's role includes coordinating settlement between the long position (Johnson) and any eligible settling shorts. The clearinghouse handles this coordination automatically - Johnson doesn't need to contact them (making B incorrect), and he doesn't deal directly with the original counterparty (making C and D incorrect). The clearinghouse's novation process means all original counterparty relationships are replaced by the clearinghouse as the central counterparty to both sides.
Author: LeetQuiz Editorial Team
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Jack Johnson is going to receive a physical commodity from a settling long futures trade. Which of the following statements best describe the role of Johnson and the clearinghouse in this process?
A
The clearinghouse will coordinate Johnson's settlement with any eligible settling shorts.
B
Johnson will have to contact the clearinghouse to coordinate with any eligible settling short.
C
Johnson will have to close his position with the original counterparty.
D
The clearinghouse will coordinate Johnson's settlement with the original counterparty only.
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